Case Study: How to loose $125k in 4 weeks.

The Business for Sale

The seller had a home based maintenance. It was a business he had started from scratch and developed over a 12 year period. The seller had never owned a business before and had learned a lot by owning a business. Like many owners, he had personal expenses in his bookkeeping, like dinners with his family and other small purchases. Before listing his business, he removed his personal expenses from him bookkeeping.

The Buyer

Another business broker brought a well qualified buyer that was looking to leave the corporate world. He loved the idea of buying a business where he could work from home.

The Offer

After meeting the seller and understanding the business. the buyer was very interested and quickly put in a reasonable offer that was accepted by the seller.

Due Diligence

The buyer requested the standard items: Tax returns, P&L statements, bank statements, W2’s, Contracts and other relevant information. As the buyer reviewed all the information, he began to see some issues. Because the seller had personal expenses coming out of his business bank account, the business was struggling with cash flow. The buyer questioned whether business made any money at all. He saw HUGE red flags on this business.

After 4 weeks of due diligence, the buyer reduced his offer by $125k based on his findings. The seller declined the offer and did not sell the business.

The Lesson

As a business owner, you can “clean up” your P&L, but you can not clean up your bank statement. It is best to keep personal expenses out of your business to get the highest price possible for your business.

About the Author

Kim Deas

Kimberly Deas, Business broker, has a career which spans 20+ years in the business of business. As a marketing professional and experienced business owner, she understands all marketing and selling aspects of businesses across multiple industries. If you are considering selling or buying a business, or want to learn more about the process of planning your exit strategy, contact Kim. She will arrange a confidential meeting to help you determine what needs to be done to get you the results you are seeking.